Trading TypesScalping, Day Trading, Swing Trading, Positional Trading


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    • Scalping

    Let us start from the fastest trading type, scalping. This is a particular type of trading that involves the opening of very fast positions ranging from a few seconds to a few minutes.

    The purpose of the scalping is to take advantage of small market movements that have little risk. So you earn a few pips per trade, but it should be considered that a full-time scalper can make hundreds of trades per day.

    Scalping is obviously not recommended for those who have not had the opportunity to spend too much time on technical charts, those who do not have strong control over their emotions, and those who have no good knowledge of the market.

     

    • Day Trading

    Day trading as the same term says is the type of trading that tends to close the positions within the same day they were open, and the duration of each trade is on average for a few hours. Even this type of trading requires a trader to have thorough knowledge of the market in which s/he operates and above alldevoting time to charting. The intra-day trader follows price trends within the 24hrs in a day and exploits them until the market volatility remains high. The popular time-frames for this type of trading are 4HR time-frame, 1HR time-frame, 30MINS time-frame, 15MIN time-frame, and 5MIN time-frame. The best times for this type of trading range from 9:00am to 5:30pm in the evening.

     

    • Swing trading

    This type of trading is different from the previous one, as it moves over the medium term, with positions that can be kept open for a few days. Swing trading requires careful market observation, and unlike other types of trading, it does not require a trader to constantly watch the market. A couple of hours a day is all that is mostly required in order to analyze the different charts.

     

    • Positional Trading

    This is the most relaxed form of trading. In fact, it takes place over the long term following the main market trends and is therefore much simpler and requires less experience compared to the others.

    It usually involves analyzing and waiting for the signal to evolve for a couple of days, weeks, or even months, after which a monitoring period of approximately 10mins daily is required on the position.The investment capital must be greater than what one can use for other trading methodologies. This is because being undercapitalized as a position trader will not only yield ridiculously low gains, but alsotempt the trader into taking more risks.

Interviews

  • the Analyst's answer

    Jean Grossett - Financial analyst

    Considering a fact that the little time frames are a small part of the whole, trading using a scalping strategy can be very rigorous. This is because you will most likely be racing against robots (EAs) to get quotes. At this level, requotes and slippages in price can be a serious pain. As a final consideration, scalp trading methodology can put a newbie trader into an emotional rollercoaster. A trader should take out time to understand market dynamics from a price action/time series analysis point of view, by subscribing to a training/mentorship program.

    Speed of trade execution is also an issue to look into. A single loosing trade can sometimes wipe out an entire day’s profit earning. Scalp trading looks into taking advantage of low range but regularly occurring market moves within a very short time interval.

    Swing trading and Position trading are the most suited for humans, considering the level of human involvement at post trade and pre trading time. They both have a long pre trading time to wait for setups to develop, and short post trading time when monitoring the trades.

  • the Manager's answer

    Robert Danvil - Investment Manager

    I will suggest scalp trading and intraday trading for machine i.e. Robots (EAs). Computer programs are better at crunching numbers than humans, and they usually do not make assumptions that are not statistically correct. EAs are not subject to emotions, where a scalper or intraday trader can get in his own way. Scalp EAs are programmed, and carry out trade operations exactly how their program logic is written. Therefore in order to attain consistent profit as a scalper or intraday trader, it is advisable to put your day to day trading logic into a computer program. These types of trading methodologies requires a high reduction of human involvement in the decision making process, both in entry/exit, and risk/money management. This will equally reduce stress, high adrenaline, and high blood pressure, and allowing the trader more time to socialize and do other things.

Members Comments

  1. Profile photo gravatar of Adrianna Zieme
    Adrianna Zieme (weimann-hertha)
    says:

    There are different types of trading depending on the behavior of trader. If someone is good at technical analysis and can understand short term swings in market, he trades frequently on daily basis and can be considered as scalper. But, If you want to include both technical and fundamental analysis, then day trading is the best choice, which means 2 to 3 trades daily. Scalper also uses less lot size as compared to day trader because if anything goes wrong, he can loss more money.

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